HATHAWAY v. RUSSELL

HATHAWAY v. RUSSELL. N. Y. Superior Court; Special Term, October, 1879. Accounting.—Interlocutory Judgment.—Appeal and Motion' for New Trial.—Exceptions.—Examination of Party. Under the Code of Civil Procedure, an interlocutory judgment that plaintiff is entitled to an accounting may be entered on a report to that effect, leaving the accounting to be afterwards had. The mode of reviewing such judgment stated. The interlocutory judgment in such a case should preserve to plaintiff the right to the formal bringing in of an account, in the form of debit and credit, as prescribed by Rule 107 of chancery, and verified by affidavit; and may give the successful party the right to examine the accounting party upon interrogatories thereon. The action was brought by Samuel Hathaway against Henry Russell and William Watson. Plaint: iff alleged that Russell was, for a long time, plaintiff’s agent and business superintendent, under employment of his entire services, and that he failed to account for the profits of the business, and that he diverted business, particularly that of defendant Watson, a customer, and threatened to collect, for his own benefit, what was due from Watson. Plaintiff asked an accounting and an injunction. Defendant answered, and the action was referred to Wm. Gr. .Nicoll, Esq., to hear and determine all the issues ; and after taking evidence the referee reported, in conclusion, that plaintiff was entitled to the profits of certain specified dealings ; that he was entitled to an accounting by the defendant in respect thereof, “and that the defendant should be ordered and adjudged to account to the plaintiff for such printing and type-setting, and to pay over to the plaintiff all profits realized by the defendant therefor, such accounting to be made under the direction of this court, and in such manner as the court shall from time to time direct.” He reported, further, that plaintiff was not entitled to an accounting as to other matters claimed. Plaintiff’s attorney filed the report, and gave notice to defendant’s attorney. No exceptions were filed, and plaintiff served a proposed interlocutory judgment and gave notice of settlement. Sutherland Tenney (Lindley & Lindley, attorneys), for the motion. This decree asks, among other things, that the plaintiff may have leave to examine the defendant Russell, on written interrogatories. This is done because it will be an absolute denial of justice if the plaintiff has to make this man Russell his witness, for the finding of the referee is, practically, that Russell has deceived and defrauded the plaintiff ; and the court should allow the plaintiff an opportunity “ to sift the conscience” of Russell, without danger to the plaintiff. I. The uniform practice, as to suits for accountings, is this; the question as to whether or not there should be an accounting is first tried, and then a reference is ordered to take and state an account (Wait’s Pr. 338, and case ; 2 Van Santv. Eq. Pr. 194). “Where the whole of the issues raised by the pleadings have been referred, it has been recommended as the better course for the referee to hear and determine such issues in the first instance separately, and report thereon to the court. If these are determined in favor of the plaintiff, and his right to an accounting be thereby established, he may then move, on the report, for another order, confirming the report, and referring the cause (usually to the same referee), to take and state the account between the parties” (2 Van Santv. Eq. Pr. 194; Palmer v. Palmer, 13 How. Pr. 365). In this case an action for an accounting was referred to a referee to hear and determine. The court says : “The referee had here, united in him, the powers of the court with that of master, as formerly exercised. He might have made, and I think it would be the better practice, in such cases, for him to make á separate report, declaring the existence of the partnership and the liability to account, which report might be confirmed upon special application to the court, so as to allow an appeal, and get the decision of the court on that point before the account is taken.” II. The referee, in this case, stood in the place of the court at special term, and he has tried the issues and has reported thereon. It is now sought that the decision of the referee be made the judgment of the court that appointed him, and the present motion is made to effect this, and therefore it is proper. III. That this practice was contemplated by Mr. Throop is shown by the peculiar wording of section 994 of the Code of Civil Procedure. IV. Unless this practice is correct, a successful party can in no way limit the time in which a defeated party must except and appeal ; for section 994 says, exceptions to a ruling, &c., “ must be so taken at any time before the expiration of ten days after service upon the attorney of the exceptant, of a copy of the decision of the court, or of the referee, and a written notice of the entry of judgment thereupon.” Y. The clerk cannot “enter judgment” on this interlocutory decision of the referee, therefore the plaintiff is obliged to apply to the court. YI. The case was summed up, and the question as to whether the defendant should account was the only question argued and submitted to the referee, and by so doing the attorney for the defendant Bussell virtually ratified and confirmed the practice now resorted to. YII. In the case of Wiggins v. Gans (4 Sandf. 646), it was decided that the defendant in such a case as might be examined upon interrogatories. In that case, Masow, J. (with the concurrence of Dtter and Campbell, JJ.), held, that the rules and practice of the courts on the subject of accounting, existing at the time of the adoption of the code, are still in force. Accordingly, it was held that a defendant who was ordered to account was bound to bring before the referee a sworn account, including both debits and credits, in the manner prescribed in rule 107 of the late court of chancery, and to submit to such examination as was allowed by that rule, namely, on interrogations. The attention of this court is directed particularly to this case, in 4 Sandf. 646 (Brevoort v. Warner, 8 How. Pr. 321). Gilbert 0. Hulse, for defendant Bussell, opposed.— The defendant desires to object to the entry of any judgment, unless it be for the defendant; and alleges as a reason that the referee erred in his twelfth and fifteenth findings of fact, in that it is against and without evidence to sustain such findings, or either of them, and also to his second conclusion of law. Section 992 of the Code of Civil Procedure provides when exceptions to rulings of the referee during the trial- of the cause may be taken. Section .993 provides that a refusal to find, when requested, upon a question of fact, or a finding without any evidence tending-to sustain it, is a ruling upon a question of law. Section 994 provides when and how exceptions. are to be taken. Section 996 provides that the exceptions, taken; as jjrescribed in last'four sections, can be reviewed only on appeal, except in a case where it is expressly prescribed by law that a motion for a new trial may be made thereupon. Section 997 provides when case necessary. Section 998 provides when case not necessary. Section 1000 provides for exceptions taken upon jury trial being heard at general term in the first instance. Section 1001 provides when a report. . . . directs an interlocutory judgment tobe entered; and further proceedings must be taken before the court, judge, or referee, before a final judgment can be entered. Motion for new trial may be made at general term after the entry of the interlocutory judgment, and before the commencement of the hearing directed therein. " Section 1002 provides: “In a case not specified in the last three sections, a motion for a new trial must in the first instance be heard and decided at the special term. But when the motion is founded upon an allegation of error'in a finding of fact- or ruling upon the law made by a judge upon the trial, it cannot be heard at a special term held by another judge.....And a trial by a referee cannot be reviewed by a motion for a new trial, founded upon such an allegation, except in a case specified in the last section.” In the case before the court, the proposition is to enter an interlocutory judgment. Sections 1001 and 1002 give us the right to move for a new trial before the special term upon our allegation of error. If the court shall be of opinion that such motion or hearing cannot be had without regular notice of motion given, it is then respectfully asked that this application may be adjourned for ten days (unless plaintiff will take shorter notice), to enable the defendant to make such motion upon regular notice. The object and reasonableness of this request will appear when it is stated that to make a case would necessitate a vast amount of labor, and when prepared would make a printed case of 400 pages, or nearly, at considerable expense. This action is for an accounting for all business between plaintiff and defendant from 1859, and the report is in favor of defendant upon all the issues except as to an accounting for an alleged small branch of the business from about January, 1873, to November, 1877, and upon which we say the referee erred in his finding. The defendant claims, and hopes to satisfy the court, that the report should have been wholly in favor of the defendant. In which case it is submitted, as the question will not interfere with the remaining part of the report, this court may order judgment for the defendant. And lastly, the defendant desires to be heard upon the settlement of the order or judgment, before signed or directed to be rendered, as to its form. There are other grounds which we shall urge upon the motion besides those already suggested. We add some authorities to show that the motion for a new trial may be made at special term. Tracy v. Altmeyer (46 N. Y. 598), Grover, J. : 1 £ The appeal from the order presents questions of greater difficulty. This order cannot be reviewed upon the merits by this court. It may be so reviewed by the general term (Code, § 349). The order denied a motion of the defendant for a new trial, upon the ground of surprise and newly-discovered evidence. From the opinion of the judge at.special term, it appears that the motion was denied solely upon the ground that it could not be made after the entry of judgment.....It follows that the special term erred in refusing to entertain the motion and pass upon the merits, upon the ground that judgment had been entered. The question is therefore presented whether a motion can be made at special term for a new trial, upon the ground that the verdict is against the weight of evidence, or surprise, or newly-discovered evidence, or the misconduct of the jury, or other ground, after the entry of judgment upon the verdict. There is obviously no distinction between this class of cases. If it .can be so made in one, it can in all. Under the former system of practice, it was settled that all such motions could be made only before judgment.” Church v. Kidd (3 Hun, 254): In this case it was held that the motion for a new trial should precede the reference ordered by the interlocutory decree. Folger v. Fitzhugh (41 N. Y. 228): Action for the value of wool destroyed by fire. Verdict rendered for plaintiff. On appeal the judgment was affirmed by the general term. At the same term, the general term of its own motion granted a stay, and gave the defendant leave to apply at special term for a new trial. The application was made and was granted at special term, was afterwards affirmed by the general term, and finally by the court of appeals. Plaintiff’s appeal from the order of special term (which granted a new trial) was dismissed, and judgment absolute (upon stipulation) was rendered for the defendant. Morrison v. New York & New Haven R. R. Co. (32 Barb. 568), Allen, J. : “To present a question of fact upon the evidence, or the right of the unsuccessful party to a new trial, for the reason that the verdict is against evidence, or upon the ground of surprise or newly-discovered evidence or the like, a motion must be made at special term ; and from the order made upon such motion, an appeal may be taken to the General Term.” Clark v. Ward (4 Duer, 206), Bosworth, J.: “ This result renders it unnecessary to act upon the motion for a new trial, made on the ground of newly-discovered evidence. Such a motion can properly be made only at special term. If made there, and denied, an appeal from the order denying a new trial will entitle the appellant to be heard on the appeal at general term on all the papers on which this motion was decided at the special term.” Devoe v. Nutter (1 Hun, 713): Two actions between same parties (one in common pleas, one in supreme court, referred to same referee). The referee filed his report and ordered judgment for plaintiff. The defendant applied at special term to have the report set aside, on the ground that he had been misled by an order of the referee, and had therefore failed to introduce certain proofs to reduce plaintiff’s demand. The motion was denied. Upon appeal to the general term, held) that the denial was error; the order of special term was reversed ; and an order made vacating the report so far as it related to the amount of recovery, and directing the referee to proceed to try and determine the question as to the amount the plaintiff is entitled to recover (Shuart v. Taylor, 7 How. Pr. 251). Macpherson v. Bonner (40 Super. Ct. [J. & S.] 449), Yah Yorst, J. : “ To be effective, a motion simply to set aside the report of a referee should be made before judgment is finally entered ; if successful, it would prevent a judgment. It would be idle to set aside the report and let the judgment stand.” As to entering such decree by consent, and its effect, see Dillard v. Harris (2 Tenn. Ch. 196). The old chancery practice was for plaintiff to get a discovery, &c., and from the answer, schedules, interrogatories, if any, and other evidence, to prepare his own charges or items of debit against , defendant, and then defendant brought in his discharge, as it was called, by presenting his statement of payment and other matters in exoneration. In 1828, Order 61 was adopted for the English Chancery, requiring parties accounting “ to bring in their accounts', in the form of debtor and creditor, and any of the other parties who shall not be satisfied with the accounts so brought in shall be at liberty to examine the accounting party, upon interrogatories, as the master shall direct ” (2 Dan. Ch. Pr. 1222). The 79th equity rule of the United States court is to the same effect, except that the examination is to be viva voce, or upon interrogatories in the master’s office, or by deposition, as the master shall direct. See also Hollister v. Barkley (11 N. H. 606). The New York rule is stated in the opinion. See Empire Association v. Stevens, 8 Hun, 515. [MAJORITY — Freedman, J.] Freedman, J. The referee to whom it was referred to hear and determine the issues, reported only in favor of plaintiff’s right to an accounting within certain limits, but did not take and state the account between the parties. This course was adopted in order to facilitate a review of his decision before putting the parties to the expense of a long accounting, and the plaintiff now applies for an interlocutory judgment, in conformity with the report. This practice has prevailed before the New Code (2 Van Santvoord’s Eq. 194, 195), and I cannot find that the latter has abrogated it. Upon the present application I cannot consider allegations of error, nor review the merits, for the evidence is not before me ; and there being.no allegation of irregularity, surprise or newly-discovered evidence, an interlocutory judgment should be entered as of course, in conformity with the report. Defendant’s right of review may then be exercised, either, under section 1,001 of the New Code, by motion for a new trial to the general term, or under section 1,349, by appeal to the general term from the interlocutory judgment. If the defendant simply claims that the findings of fact do not support the conclusions of law, he may, within ten days after service of a copy of the decision or report of the referee and notice of the entry of the interlocutory judgment thereon, file exceptions to the conclusions of law, and rely solely upon them. If, on the other hand, he claims that there is no evidence to sustain the findings of fact, or that the referee refused to find facts which he should have found, and desires a review of the questions of law arising upon such findings or refusals to find (for such questions constitute questions of law under section 993), or if he desires a full review upon the law and the facts, under section 1,349, he must make, serve and print a full case containing the appropriate exceptions, together with the evidence. But whichever mode of review he may resort to, he must go to the general term, for the remedy by motion for a new trial on the judge’s minutes, or by a similar motion to the special term on a case, applies only to trials by jury, while section 1,002 expressly provides that a trial by a referee cannot be reviewed by a motion for a new trial, founded upon an allegation of error in a finding of fact or ruling upon the law, except in a case specified in section 1,001. As to the mode in which the interlocutory judgment should direct the accounting to proceed, it must be considered that an accounting before a master in chancery was regulated by the rules of that court, the 107th of which provided that “all parties accounting before a master shall bring in their accounts in the form of debtor and creditor; and any of the other parties, who shall not be satisfied with the accounts so brought in, shall be at liberty to examine the accounting party upon interrogatories, as the master shall direct.” In Wiggins v. Grans, decided in 1851 in the superior court, with the concurrence of three judges, it was held that the rules and practice of the court of chancery, on the subject of accounting, existing at the time of the adoption of the Code, are not inconsistent with any provision of the. Code, and that consequently, by section 469, they are continued in force. The defendant, in that case, was thereupon ordered to bring in an account like that prescribed by the said 107th rule, duly verified as prescribed by the chancellor, and file it. with the referee within ten days, in default of which the plaintiff might apply for an attachment. Since that time the same rule has been recognized by the supreme court in Palmer v. Palmer (13 How. Pr. 364), and Ketchum v. Clark (22 Barb. 319), and I cannot find that any change has been effected by the new Code. The conclusion is, therefore, that although the formal mode of proceeding under the chancery rules must not necessarily be pursued, the plaintiff, nevertheless, has the right, if he demands it, to the formal bringing in of the account in the form of debit and credit, as prescribed by the rule, and duly verified by affidavit, as stated in Story v. Brown (4 Paige, 112) and Benson v. Le Roy (1 Id. 122), and to the examination of the defendant upon interrogatories. The motion for interlocutory judgment must be granted, as prayed for. The interlocutory judgment was accordingly settled and entered as follows: On reading and filing the report of, <fcc., bearing date, &c., and filed on, &c., to whom it was referred to hear and determine the issues in this action, and it appearing to the court that an accounting of the printing or type-setting of The Church Journal newspaper mentioned in the complaint, from, on or about, &c., to and until, &c., is necessary before final judgment can be entered in this action: Now on motion, &c., for the plaintiff, it is adjudged and decreed— That it be referred to, &c., as referee, to take and state an account of all dealings and transactions between said defendant, Henry Russell, and the said The Church Journal newspaper, or the printers or proprietors thereof, with respect to the printing or type-setting of said newspaper, and with respect to any and all profits arising thez-efrom, from, &c., to and until, &c.; and for the better taking and stating of such account that the defendant, Henry Russell, produce and file, with the said referee, within twenty days after the service of this judgment on him, an account of all the said business transacted by him in and about The Church Journal newspaper, from, &c., to, &o., said account to be stated by items in the form of debtor and creditor columns, and that plaintiff be at liberty to surcharge and falsify said account, so to be exhibited by said defendant, and to that end may cross-examine said defendant as to said account, or any item thereof, either orally before said referee, or on written inten’ogntories, to be filed with sziid referee, and served on defendant’s attorney within twenty days after said account is filed, and the sworn answei’s thereto to be filed with the referee within twenty days after the interrogatories are filed; and for the purposes of the oral exaznination, hereinbefore provided foz1, the defendant Russell shall attend before said referee, at such times and places as said referee shall from time to time appoint, and the said plaintiff and the said defendant Russell are to produce before the said referee, upon oath, all books, accounts, deeds, papers, contracts, vouchers and writing1 in their custody or under their control, relating thereto; and said referee, in taking such account, is to make all just allowances to the parties as between themselves; and what, on balance of the said account, shall appear to be due from either party to the other, is to be paid as the said referee shall direct; and the said referee is at liberty to state and report any special circumstances, as well as his reasons for allowing or disallowing any allowance which may be claimed. And it is further ordered that the question of costs, as well as all other questions, are reserved until the coming in of the report and hearing, for further directions.